BuzzFeed News Quotes Kelly Cleary on CMS Plan to Cut Medicare Reimbursement Rates

BuzzFeed News has quoted Akin Gump health care and life sciences partner Kelly Cleary in the article “The Trump Administration Wants To Cut Back A Billion-Dollar Healthcare Program. Hospitals Say Now Is A Really Bad Time.” The article reports on a three-year long battle between the Department of Health and Human Services and certain hospitals over a policy that cut Medicare reimbursement rates for drugs that some hospitals acquire at a discount.

The case is currently pending before a federal appeals court, but the article says that the Centers for Medicare & Medicaid Services is exploring another way to make the cut if it loses the case, over the objection of hospitals. As the article notes, certain nonprofit hospitals that serve a high proportion of lower-income patients can buy outpatient drugs at a discounted price through what’s known as the 340B program. Until 2018, Medicare reimbursed 340B hospitals for outpatient drugs according to the average sales price, or ASP, of the drug, plus a percentage to cover overhead. Hospitals that acquired these drugs at deep discounts through the 340B program were able to keep the difference between the Medicare reimbursement amount and the discounted acquisition cost.

While 340B hospitals are under no obligation to justify how they spend their 340B savings, Cleary said many hospitals have come forward to provide examples of how they were using the funds to expand services into underserved areas and provide free or low-cost care. “The money was going toward a purpose that was consistent with their mission,” she said.

The article suggests that the 340B policy, which has been in place since January 1, 2018, could create greater financial strain for those hospitals at the losing end of the equation. But because the policy was implemented in a budget neutral manner, some hospitals actually saw increased reimbursement for non-drug items and services. “The pandemic amplifies the significance of this policy, but the fact remains that there were winners and losers with the policy and it’s always going to be a zero-sum game,” Cleary added. “If the court rules against the agency and the agency is forced to walk back the policy, that stands to negatively impact thousands of hospitals.”